FOS rules against adviser over 70-year-old’s £500k investment

The Financial Ombudsman has dismissed the claims of an advice firm that a client understood the risks of an equity-heavy investment of around £500,000.

Jones Financial disagreed with an earlier adjudicator’s ruling that said Miss G should not have been recommended any investment at all.

The advice firm said the adjudicator has been persuaded by the complainant “pulling at her heartstrings” and that it was untrue Miss G did not have any knowledge of investments.

But the Ombudsman backed the adjudicator and ordered Jones Financial to pay £100 and make up any difference between Miss G’s investment and what it would have been if invested at base rate plus 1 per cent, with an additional simple 8 per cent interest rate on any loss.

Ombudsman Roger Yeomans says: “How did it come about that a person nearing 70 years of age with a substantial pension income, who’d never held any investments and who was suffering from a life-threatening illness, placed around half a million pounds (nearly all of her assets) in one open-ended investment company which exposed around 50 per cent of that money to the vicissitudes of the world’s stock markets?”

He adds: “I don’t see why Miss G, with so much money and no dependents, and with a life-threatening illness, would wish to subject herself to the as yet untried, the unfamiliar and potentially nerve-racking experience of watching her fund value – which comprised nearly all of her assets in one place – rise and fall in line with the world’s stock market.

“And indeed when Miss G found herself subjected to that experience, it was too much for her.”

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19th March 20182:18 pm

Comments

There are 23 comments at the moment, we would love to hear your opinion too.

Reading this makes me so disappointed with some advisers in our industry… no mention of whether the adviser was tied or independent but either way this sounds pretty excessive and cavalier practice to me. Why is this type of thing still going on, don’t these people realise that it is this type of practice that is giving the honest hard working IFAs an unjustified bad name and killing off our industry !

There is not enough information here to be able to make any kind of judgement as to whether it is the adviser or FOS who have been reasonable. I have a number of clients in excess of age 70, with very significant sums invested…. and they are completely clear on the risks associated with this. 70 is not the great age it once was and not everyone over this age should automatically be classed as ‘vulnerable’.

You may well have many experienced over 70 year old investors as do I, but a 70 year old investing half a million quid in an upper medium portfolio just for “growth”? Doesn’t stack up. Was always going to be vulnerable to complaint that one. Agreed we don’t have all the info but the red flags are there!!

reading the adjudicators response, I have some sympathy with the risk assessment, BUT you still do not put all the assets into one investment! appears that the advice was on a % basis as well, but maybe from the provider as against an invoice direct to the client.
There was no excuse not to recommend some of the funds being held on deposit or placed in lower risk assets – I agree with the previous comment, 70 is not vulnerable, but other considerations have to be accepted as well.
I do however think this 8% simple return added on is a bit excessive, you would need to invest in 100% equity based investments to get anywhere near this !!!

Whilst I agree fully that older lives need a different approach to investment planning , the problem with FOS is the redress . A client where risk is inconsistent with the norm is recompensed on the basis that they get redress based on rates not achievable from deposits . If you are saying that equity investment is inappropriate , why is the compensation based on such a high return ? Surely it should be equitable , if you should have been in low risk deposits then the return should be capital plus loss of interest based on an average return on cash investments . If the capital was removed from cash following advice , it’s unlikely an inexperienced investor would have done this of their own volition . Cash equivalence plus a sum for poor advice would be more realistic !

It is nigh on impossible for us to judge without sitting in on the case, but the report link says of Jones ‘It had discussed the prospect of deposit accounts but Miss G didn’t want those’ which to me is the fundamental moment. If the client rejected low risk cash, then under what circumstances is the client entitled to demand something higher risk or should the adviser firm simply walk away in such circumstances? Did the ombudsman think that a lower risk fund(s) should have been recommended or none at all.

That’s why we have been recording client meetings since 2007. Second client I recorded is the nearest I have ever been to having a client go to the FOS. The Suitability reports were going to be as much use as a chocolate fireguard, having had the daughter sit in on the meetings (good practice for the elderly) was also going to be as much use as a chocolate fireguard as the daughter didn’t want to disagree with her mother and tell the solicitor who handled the case (the client had refused to pay the previous solicitors bill for a deed of variation of her husbands will the year before). The ONLY reason the case never went to the FOS was when the solicitor put the complaint issues in writing, they made allegations of what was said and not said (the written report said it) , but teh client had failed to tell the solciitor the meetinsg were recorded, so we were able to send the preceed recording to the solicitor who then dropped the case like a hot potato. The client then complaiend about the solciitor and the adviser of the new firm (who i knew as they were local) and moved on to the next person to complain about.
It sounds to me like this FOS case is a prime example of where a “fly on the wall” recording would have been useful because as Graham Ponting says, the written document (Factfind)is just one part of the KYC process and the written is just one part of communication and most clients and advisers place more importance on what is SAID or pictures (i.e. my word is my bond a picture paints a thousand words) than the written small print bolloCX that lawyers and The F-pack seem to like as it keeps them in a job.

I see there is a link in the article to the FOS decision and I suggest ALL read it.
To protect the capital for an under 70 year old, 50% exposed to equities is not unreasonable. Were this an exam question in R06 or AF, I suspect the advice would have been near a model answer. The FOS confirms the risk rating was appropriate and documents matched and yet the finding is against the firm. Bollox…

If savings accounts were used, then 7 different financial institutions would have been required in order to spread the risk so that each deposit was under 75k i,e the current FSCS limit for deposit taking. Is this what the FOS consider the most appropriate advice?

OK here goes, the Ombudsman has either made a genuine mistake or has knowingly misrepresented the facts in the case by stating on the public record that Ombudsman Roger Yeomans says: “How did it come about that a person ………, placed around half a million pounds (nearly all of her assets) in one open-ended investment company” He has made a statement of FACT in his public document which I believe is NOT factually correct. Why?
I believe if a court was to investigate this case, you will find that rather than one collective having been used, multiple collectives were used as would have been required to protect the consumer should it have been decided that as the FOS imply, savings accounts would have been more appropriate in which case as I stated earlier 7 would have been needed. Even had NS7I or gilts been used, then following brexit, whilst on face value the consumers money might have appeared the same in cash deposits as we all saw following brexit, a well balanced portfolio went UP becuase of the devaluation of sterling.
The FOS decision is flawed and the decision report is disingenuous and massages the facts (in my opinion) to suite the desired outcome of the not impartial FOS.
That’s my opinion and I am stating it subject to:
FREEDOM OF EXPRESSION – ARTICLE 10 THE HUMANRIGHTS ACT 1998:
This guarantees the right to pass information to other people and
to receive information that other people want to give you. It also guarantees the
right to hold and express opinions and ideas. Journalists and people who publish
newspapers and magazines can use Article 10 to argue there should be no restrictions
on what they write about. Artists and writers can use it to defend themselves against
people who try to censor their work. Article 10 is a ‘qualified’ This means that the
Government or a public authority may be allowed to restrict or interfere with the
right in certain circumstances. The Government or the public authority must show
that there was a clear legal basis for the restriction or interference. Its actions must
pursue one of the eight aims set out in Article 10, which include: No 1 the prevention
of crime; No.2 the protection of morals; No.3 the protection of other people’s rights or
reputations; No. 4 the protection of confidential information. It also has to show that
the interference was ‘necessary and proportionate’ (that it was done for a very good
reason and went no further than it needed to).

So are we supposed to be following the LAW or just guessing which way the FOS will blow on the day. Come on Ms Weyman, I am really confused as having started my banking career/exams in the 80’s which did include some law relating to banking, I am getting really confused as to what I am supposed to be doing. Ignoring case law in favour of FOS or following FOS adjudications and basing my advice in that?
Which is it?http://www.financial-ombudsman.org.uk/about/panel-ombudsmen.html

All these Ombudsman with legal backgrounds and yet they make the rules up as they go along after the complaint comes in!

A quote from the DRN notice from the FOS…
“… the business’s points have some force. the paperwork seems to be in order. Mis G replied to questions in a way that appeared to justify the attitude to risk the business assigned to her. The recommended investment appeared to fit the assigned attitude to risk. And in the paperwork Miss G appeared to declare she wouldn’t be overly concerned if the value of the investment fell be MORE than it in fact fell by.”
So on paper the firm did everything the FCA rules and it’s staff’s MANDATORY training required if it and yet it was required to be as psychic as the Ombudsman has been and to decide to act contrary to both it’s training AND more importantly what it documented as the client saying.
This case sounds a mirror image of the only case I NEARLY had go to the Ombudsman (which didn’t) as it was the second consumer who I EVER recorded meetings for. She had £450k on deposit with Northern Rock in 2007, which is what the FOS is arguing this Miss G should have done and yet after I advised her to have a balanced portfolio which fell 5% at the banking crisis (rather than being converted to £32,500 as the FSCS SHOULD have done had Northern Rock NOT been bailed out by everyone else) then complained about the small fall.
I now record every client meeting and wouldn’t trust the FOS any further than I could throw my granny (and I’d have to dig her up first!) based on some of the perverse decisions they come up with

Hi Philip, I totally agree. There is conflict between the guidelines of the FCA and the logic of FOS. There really is not enough information, without a recording, to make a judgement. my best guess is that the adviser was attempting to do the best for the Client and the beneficiaries. I would think that the client also did have a cash holding somewhere.
Barney…..stop jumping to conclusions, if you had a bad deal, report it.

Sadly regardless of rights or wrongs, we must all price into our equations perverse judgements and complaints (I don’t say that glibly or to say I accept the position). There are many cases too where it’s not the nice client of many years who is complaining but the aggressive beneficiaries (or their lawyers) of a deceased estate and the Ombudsman then investigating and reviewing the file according to its criteria and convenient hindsight of what ‘went wrong’ (usually a market fall). I have a record from a few years ago where the Ombudsman said universally that ‘equities were inappropriate for someone over 60’, or something like that.

It won’t be long where more judgements are made anyway on poorer comparative performances of the advice than the client achieved – there have already been a few but the service will have lots of time and staff on its hands when the PPI issues abate. Maybe then it will be deposit rates v a balanced portfolio which should ahve been advised… watch this space. Then the Ombudsman adjudges that an index is fine and guess what – they don’t make any allowance for any advice or fees at all, giving the complainant an inequitable ‘profit’ at the adviser’s cost.

Once again the F-pack appear to be prevaricating when any firm try’s to obtain clarification on their decisions.

I have enclosed their response to my FOS request. From this you will see that their decision notice is anonymised and I have queried their right to jurisdiction, which it appears from their response, Royal London had also questioned.

In their decision notice, they do not confirm whether the case went beyond the 15 year longstop, nor whether there were any “exceptional circumstances” they also fail to point out what occurred and when which meant they should have known or reasonably known they had cause for complaint… Basically, they are effectively claiming an infinite right to jurisdiction whether exceptional circumstances exist or not and they deny any “reasonable notice”

I have asked them to anonymise the case completely by redacting names, but they imply in here they cannot do so whereas as we all know with the Chilcott Report and “Maxwellisation”, it is perfectly possible (especially as their reports are written using word processing software) to remove them name of the individual concerned.

I would ask therefore that you ensure they provide a full and frank explanation of how they have arrived at this decision as other than via judicial review, FOS cases cannot be challenged and based on their secrecy and obfuscation here, it is my belief they did not have jurisdiction and know it, but by presenting their DRI notice in this way they hide their own indiscretions.

CC FOS in case they would like to call to provide some form of clarification (off the record if they wish) which may be able to reassure me that they are not acting out with their remit and outside common law.

FREEDOM OF EXPRESSION – ARTICLE 10 THE HUMANRIGHTS ACT 1998:
This guarantees the right to pass information to other people and
to receive information that other people want to give you. It also guarantees the
right to hold and express opinions and ideas. Journalists and people who publish
newspapers and magazines can use Article 10 to argue there should be no restrictions
on what they write about. Artists and writers can use it to defend themselves against
people who try to censor their work. Article 10 is a ‘qualified’ This means that the
Government or a public authority may be allowed to restrict or interfere with the
right in certain circumstances. The Government or the public authority must show
that there was a clear legal basis for the restriction or interference. Its actions must
pursue one of the eight aims set out in Article 10, which include: No 1 the prevention
of crime; No.2 the protection of morals; No.3 the protection of other people’s rights or
reputations; No. 4 the protection of confidential information. It also has to show that
the interference was ‘necessary and proportionate’ (that it was done for a very good
reason and went no further than it needed to).
Response
I’ve carefully considered your request.
From 1 April 2013 we’ve published our ‘final determinations’ on our website – i.e. final decisions on the merits of a case. Our ombudsmen ensure that these decisions are written in a way so that they are anonymised in their content – provisional and jurisdiction decisions are not anonymised as they’re not published.
In the case you’ve referred to, the financial business objected to us investigating the complaint on the basis that the complaint was timebarred at six and three years. The complaint was passed to an ombudsman, who issued a jurisdiction opinion saying that the complaint was not timebarred – as it had brought within three years of the date that the consumer knew, or ought to have known that he had cause for a complaint.
I’m unable to provide you with any further information about the decision or a copy of the decision as the jurisdiction decision is not anonymised and therefore contains the personal data of the consumer.
The personal data of others is exempt from disclosure under section 40(2) and (3) of the Freedom of Information Act 2000 if disclosing this information would be likely to
please write to
Information Rights Officer
Financial Ombudsman Service
PO Box 73208
London
E14 1QQ
dx
141280 Isle of Dogs 3
websitehttp://www.financial-ombudsman.org.uk
Page 2 of 3
breach the first data protection principle, which provides that personal data shall be processed fairly and lawfully.
We have a duty to keep the personal data of consumers who bring their complaints to our service confidential and we don’t consider that they would reasonably expect their data to be made public.
I hope that my response addresses your request; but, if you don’t believe we’ve fully complied with the Freedom of Information Act 2000 the next steps are overleaf.